A non-partisan blog dedicated to a discussion of politics from a social scientific perspective.

Friday, March 30, 2012

Paul Ryan vs. Barack Obama

Representative Paul Ryan (R-WI), Chair of the House Budget Committee, released his budget proposal for FY 2013 during the past week. The plan immediately drew criticism from Democrats for targeting programs such as military pensions, food stamps, and Medicare with major cuts of as much as 33% while proposing tax cuts for the wealthiest Americans, particularly those who derive all or most of their income from capital gains. Under the Ryan plan, individuals like Warren Buffett and Mitt Romney would have virtually no tax burden while the poor and middle class would experience higher tax bills. Couple that with more restrictive programs for the poor and vulnerable and it amounts to what Newt Gingrich ominously referred to a year ago as 'right-wing social engineering.'

Meanwhile, President Barack Obama's FY 2013 budget request has been all but ignored by the Republican House, largely because it contains higher taxes on individuals making over $250,000 a year...the people who can actually afford to pay a bit more.

Neither the president's budget nor Paul Ryan's budget does much to address the nation's most serious problems, including long term structural deficits totaling in the tens of trillions of dollars. The Ryan budget proposes to balance the budget by 2040, a whopping 28 years, by which time the debt of the United States will have more than doubled. Add to that the fact that Congress is incredibly poor at actually sticking to a budget and that future Congresses rarely abide by what their predecessors have done and the likelihood of the Ryan plan actually accomplishing its goal is slim, if not nil.

But what the Ryan proposal does is give the Republicans a line of argument for the fall campaign that at least they have put together a proposal. Whether it had any chance of adoption is irrelevant. Of course, that's another problem Congress has...it has no incentive to work with members of the opposite party to work out real solutions to real problems. So the rhetoric will go on and on and on.

Republicans will argue that President Obama 'added' more to the federal debt in 4 years than President Bush did in 8 years. That depends on how one calculates debt and deficit. I argue that in order to properly calculate a president's effect on the debt and deficit one must examine the revenue increases/decreases, expenditure increases/decreases, and deficit projections contained in their (and their immediate predecessor's) budget proposal. Let's see where that leads us.

In FY 2001, the final budget under President Clinton and the Republican Congress, called for total federal spending of less than $1.9 trillion and achieved a surplus of $128 billion. Over the next ten years, a surplus of more than $5 trillion was projected. If realized, the United States would have been essentially debt free by FY 2011. However, the economy slipped into recession and Congress passed a 'stimulus' package in the form of tax rebates during 2001. Coupled with increased spending in the first Bush budget (5% increase from $1.9 trillion to $2 trillion) and a reduction in revenues of $138 billion (due to tax cuts and weaker economic activity) produced a deficit of $157 billion for FY 2002. Spending would continue to grow at a faster clip under President Bush than it did under President Clinton for the remainder of his two terms. The final Bush budget was $3.1 trillion for FY 2009, a full 55% higher than his first budget proposal in FY 2002. It contained a deficit of $1.4 trillion, largely due to a massive decline in revenues that reduced total receipts back to near the level of FY 2000, approximately $2.1 trillion. That's a net increase in the deficit of more than $3.5 trillion since FY 2001. Add the lost surplus of $5 trillion and it amounts to an actual increase of some $8.5 trillion in debt...more than $1 trillion per year!

That, of course, is when the figures most beneficial to President Bush are used...that is total revenues less outlays PLUS any surplus generated by the Social Security and Medicare programs. These programs ran a surplus of $1.34 trillion during the Bush years. This means the actual Bush effect on the debt was closer to $7 trillion since the off-budget surplus was surely a part of the projected $5 trillion surplus from FY 2001-2010. Review the actual budget figures here.

What about the Obama years? What portion of the record budget deficits should rightly be attributed to his administration? First, we need to know what the OMB projections were for FY 2009-2016 were when he took office. Fortunately, we have such projections! If none of President Obama's policies had been adopted OMB projected total deficits around $8 trillion. That's right, with NO new spending the deficits would STILL have been averaging $1 trillion per year, largely due to the policies put in place during the Bush years (multiple unpaid for tax cuts, prescription drug benefits for Medicare, and the ongoing costs of two wars) plus the aging of the American population.

So what has been the effect of President Obama's policies on the debt and deficit? To be charitable, we'll include all of the $800 billion stimulus package passed in 2009 even though it was part of FY 2009. We'll also subtract that from Bush's deficit total leaving him with a legacy of $6.3 trillion over 8 years. According to OMB figures the deficit for FY 2010 was $1.3 trillion, FY 2011 $1.64 trillion, FY 2012 $1.1 trillion (estimate), FY 2013 $767 billion (estimate), FY 2014 $644 billion (estimate), FY 2015 $604 billion (estimate), and FY 2016 $648 billion (estimate). Assuming President Obama is reelected (not a certainty), the debt is estimated to have increased by $7.5 trillion by 2016. This estimate includes allowing ALL the Bush and Obama tax cuts to expire at the end of 2012. If any of them are reauthorized, which they almost certainly will be, the cumulative deficits over the next four fiscal years will rise another $1.4 trillion.

What do the numbers actually show? Primarily that 'massive spending increase' under President Obama that conservatives keep screaming about never happened. Also, that the massive debt increases due to President Obama's policies also are a figment of their imagination. To be sure, the debt is a problem as are structural deficits. But that's the kicker...the deficits are structural, not endogenous to a single president except where that president advocates and agrees to policies that directly add to or subtract from the deficit/debt. The only true increase in federal spending under President Obama in the first four years has been the stimulus package in 2009, which stabilized the economy and provided an opportunity for it to begin growing once again. The primary culprit has not been increased spending but rather decreased revenues. Revenue in 2000 was just over $2 trillion. By the end of 2011 it had only reached $2.17 trillion in spite of inflation, an increase over 10 years of less than 10%. From 1980 to 1990 revenue doubled from $500 billion to $1 trillion, from 1990 to 2000 it doubled again from $1 trillion to $2 trillion (and we had 4 consecutive budget surpluses). Had revenues simply continued on that pace the country would be debt free. Instead, because of terrible choices over the past decade, America is left with unsustainable deficits and debt. We shouldn't pin the blame on President Bush or President Obama because doing so is just partisan politics. Rather, we need to pin the blame on those who ought to know better, our elected representatives in Congress. Ultimately, we are responsible since we keep sending the same clowns back to Washington even though they have proven themselves incapable of governing responsibly. Shame on us.

About Me

I am an Assistant Professor of Political Science. My research interests include the presidency, the Congress, and institutional relationships. I'm married (Kate) with one daughter. We have two rescue hounds named Remy and Tessie, who love to get into trouble. My wife and I are the owners of the web based travel agency 'The Cruise Doctor' We love traveling to Walt Disney World and just about anywhere by cruise ship.